The insurance and reinsurance industry loss from Hurricane Michael in Florida has crept higher in the last month, rising 4% to $6.91 billion as the regulator notes that it is “discouraged” by the fact over 20,000 claims remain open.
Speaking at a recent Florida Cabinet meeting, Insurance Commissioner David Altmaier said the fact so many claims remain open is discouraging and has urged the industry to address claims as swiftly as it can.
Hurricane Michael struck the Florida panhandle region in October 2018 and the insurance and reinsurance market now fears that hurricane Michael’s industry loss toll will continue to steadily rise.
After the experience with loss creep that came from hurricane Irma in 2017, a storm that has yet to see all its claims settled at this time, the industry is nervous of a repeat from Michael.
In recent weeks, our industry sources across insurance, reinsurance and insurance-linked securities (ILS) have voiced their concerns over the potential for hurricane Michael’s loss to continue creeping higher.
The latest industry wide estimate of hurricane Michael’s insurance and reinsurance loss is for an impact of around $11 billion, according to broker Aon, a figure released in April and that was higher than prior estimates given for the storm. Reinsurer Munich Re pegs the loss from hurricane Michael at $10 billion.
Back in mid-March, the Florida’s Office of Insurance Regulation (FLOIR) reported just below $6.1 billion of insurance claims paid out for hurricane Michael, with the percentage of claims closed sitting at around 80%.
Since then, new and late reported claims continued to flow in and by the end of May the industry loss figure from the FLOIR stood at just over $6.61 billion, while the percentage of claims closed only managed to rise to 84%, with 23,194 hurricane Michael claims remaining open at that time.
That suggested a way to go before hurricane Michael’s industry loss would settle.
By the end of June, the industry loss toll continued to rise, albeit more slowly, reaching $6.65 billion, with 21,669 claims, or about 14.7% still open.
Now, the latest figures as of July 28th show a slight acceleration in the industry loss figure, which has now reached $6.91 billion, a 4% increase from the end of June.
At the end of July 20,484 claims remain open, still around 14%.
The number of claims being filed has slowed, to just 470 for July, with claims settled now slightly outpacing that number.
However, on the current run rate it could be months before the final tally for hurricane Michael is understood, so it’s no surprise the regulator wants to speed things up.
The Florida Office of Insurance Regulation said it will launch an enhanced data call, to collect additional information from insurers on open Hurricane Michael claims and to try to identify any trends slowing settlement.
With 107,630 claims closed and paid, at the cost of $6.91 billion, the average claims cost comes out at just over $64,200.
If the claims remaining were settled at a similar price it could add as much as another $1.3 billion to the industry claims total for Florida from hurricane Michael, taking the FLOIR’s number above $8 billion.
However, of the claims remaining many are in the higher value end of the market, with just 62.4% of commercial property claims closed, 73.3% of commercial residential and 62.9% of business interruption claims closed at this stage.
Depending on how those remaining commercially focused claims settle, the loss from hurricane Michael may well reach further above $8 billion by the time the FLOIR stops reporting on it.
With impacts across other states and the claims the FLOIR does not count to also consider, it’s easy to believe that Aon’s $11 billion insurance and reinsurance market loss estimate for hurricane Michael could actually be surpassed.
If assignment of benefits (AOB), or litigation related, issues emerged, it could easily end up above that level before the loss is deemed closed by the market.
For insurance, reinsurance and ILS market interests it is clear that the loss creep from hurricane Michael is likely to continue for some time, given the large number of claims remaining open.
Given the top-end of initial loss estimates for hurricane Michael were at around $10 billion and it now looks set to surpass that, once all claims are identified and paid in Florida and beyond, there’s a good chance further reserve strengthening may be seen for this storm.
Hiscox recently strengthened its hurricane Michael reserves and it’s possible we’ll see others do similar in months to come.